Generalized Predictive Control Policies of Competing Decision-makers in Macroeconometric Models

Abstract

Abstract The purpose of this paper is to explore the applicability of generalized predictive control policy to macro-economy represented by dynamic game-theoretic approach with decentralized, fiscal and monetary policy-makers. We can discuss two types of policy structure: (i)Cooperative type (ii) Noncooperative type. We consider the game policy approach in the case that competing policy-maker would take up the first priority in policy-making. We define the framework of optimal control policy solutions in the two decentralized policy-makers. The parameter estimation will be discussed under various optimal stabilization policies. Generalized predictive control algorithm is adopted for estimation of parameters of control equations derived from the optimal control strategies. We build the small quarterly econometric model of -Japan. We show the simulation results using this model. We investigate the effectiveness of fiscal and monetary policies with the parameter variations of the optimal control policy equations.